Capital gains tax (CGT) relating to property in Spain can be a complicated subject, especially if it involves two jurisdictions or different countries of residence and nationality.
It is a tax on the difference between the sale price of the asset and its original purchase price when there is a profit (a gain). Here we are going to concentrate on two countries; Spain, our area of expertise, and also mentioning the UK where many of our clients come from.
There is no capital gain tax in Spain on a division of tenancy in common, or change of ownership (e.g. two owners to only one following a divorce).
There are many regulations and many binding answers from the Spanish Tax Office. It is totally clear. This regulation clearly states that there is no capital gain tax on a division of tenancy in common in Spain, as there is not seen to be any gain.:
SG de Impuestos sobre la Renta de las Personas Físicas of 26/03/2015
Ley 35/2006, arts. 33, 34 y 35, TRLITPAJD RDLeg 1/1993, arts. 2, 4, 7 y 31, TRLRHL RDLeg 2/2004, arts. 104 a 110
The clients have to be assessed for CGT where the property asset is located. In Spain, there is none on a division of joint tenancy but it is possible that the UK can charge CGT on any gain (the difference between purchase value and value of any transfer now). Please seek advice of an accountant or tax adviser in the UK in this respect.
Although there is a Double Taxation Agreement between UK and Spain, this only means that any tax paid in Spain would act as a credit towards UK tax.
Definitely per the law, there is no CGT as above payable in Spain.
There is no capital gain tax in Spain on donation, because there is no gain. It is clear. Clients are not getting any money, a financial gain, as per the original definition. So clients do not pay for a gain that does not actually exist. This applies to non residents and residents alike.
Please refer to UK tax adviser for advice on this.
When a Non-Resident of Spain sells a property in Spain, 3% of the sales price is retained at the Notary for capital gains tax. If there is no gain or profit on the value being transferred or other taxes owed to tax office, this sum can be applied for to be returned, and eventually will be, by the tax office.
You will see on various forums people complaining how long it takes as it can take over a year. It must actually be applied for as it does not happen automatically. So your solicitor should be asked to do this for you.
For Non Residents of Spain capital gains tax in Spain is currently charged at 19% on the gain.
As a UK Resident you pay CGT in Spain as above, but then you use this as a credit against your UK CGT because of the double taxation treaty. You should refer to a UK accountant for advice specific to the UK side but there is likely to be CGT applicable.
If you are a Resident of Spain selling your property in Spain or UK, Spanish CGT is charged on the sale of any assets worldwide. 3% is not retained at the Notary. However you pay CGT as calculated by your accountant in Spain in your tax return (Renta). The amount of tax would depend on your total level of gain within the Spanish tax year. As there are different brackets and maybe you also had a profit on investments for example.
CGT is payable the same as gains on savings and investments (so currently Up to €6,000 – 19%, €6,001 – € 50,000 – 21%, over €50,000 – 23%)
But if it is main residence (you have to have lived there 3 years) and you are over 65 there is no capital gains to pay.
If you are under 65, and you bought 1994, then there are allowances for reinvestment in another main residence but it is complicated. You must report the sale on your tax return for the year you sell.
This relief if there is a reinvestment in a main residence is only within the EU. Thus at the moment we are waiting to see if this will still apply post the end of the transition period for Brexit post January 2021. It could be that Residents of Spain will no longer be able to avail themselves of this relief. At the time of reading this and selling you need to receive up to date advice from Spanish accountant.
As we said above in the first part under sale, non residents of Spain pay CGT on gains on the sale of Spanish property.
We mention this as this has been greatly publicised recently in the media. Possibly leading to confusion for the owners of overseas holiday homes in Spain. There has been a big change in the deadlines for paying CGT after the sale of a residential property in the UK. Plus other changes regarding main residence relief.
However the main change is that from 6th April 2020 if you sell a Residential Property in the UK. Then you have to advise the HMRC (an online service. And pay any CGT within 30 days. You will not be able to defer payment of this CGT until you make your self-assessment return any longer. Although tax payers who use self assessment still have to report it there as well. Normally, however, the sale of your main residence is exempt. Plus other transfers such as between husband and wife. Again specialist UK advice may be needed.
Yes, as explained two paragraphs above. Many non resident UK property owners still think the old rules apply that they can avoid UK CGT such as pre 2015. To make it clear, from 2015 the sale of a UK property can now incur CGT of around 28%. If a profit was made after April 2015, depending on the circumstances. The loophole whereby those not liable for UK tax has now unfortunately disappeared.
As explained above – you are liable to pay CGT on gains made on worldwide assets – CGT is payable the same as gains on savings and investments (so currently up to €6,000 – 19%, €6,001 – € 50,000 – 21%, over €50,000 – 23%).
However because of double taxation you pay where you are resident and then use that as a credit for the other country. If you are recently to become Spanish Resident you should seek specialist advice from a Spanish tax expert. Ideally on cross border tax issues, before you actually sell.
This is all very recent. We have read that for those UK Residents concerned about the sale of any Spanish property. That the disposals of any foreign property are not regulated by these new rules. Some say you do not have to make the usual online report. And make a CGT payment when the property is outside of the UK. However that is not to say that there is no CGT payable in the UK. As mentioned above, any CGT paid in Spain will be credited towards the UK CGT bill. (Pease contact a UK accountant to discuss), it is just that you do not need to adhere to the 30 day rule.
However our opinion is that this is new, and risky not to take advice. You should seek advice from an accountant in the UK in any event.
As a Spanish Resident, when you sell a property in the UK, you should inform HMRC within 30 days. Even if no CGT eventually is payable. If there is a payment due you may have to pay it within that time frame. So do refer to a UK accountant or tax adviser quickly.
Any payment made in Spain from CGT payable in Spain through your annual tax return could be used as a credit due to the double taxation treaty. Please seek specialist UK advice on this aspect of UK CGT.
We are not accountants, but Spanish Tax Lawyers. However we seek to clarify. If we can help with any transaction you may have, please let us know. For advice on capital gains tax please contact your accountant directly.